[Federal Register Volume 68, Number 188 (Monday, September 29, 2003)]
[Notices]
[Pages 56030-56031]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-24503]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-48500; File No. SR-PCX-2003-36]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change and Amendment No. 1 Thereto by the Pacific Exchange, Inc. 
Relating to the Composition of Its Audit Committee

September 17, 2003.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on July 14, 2003, the Pacific Exchange, Inc. (``PCX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'' or 
``SEC'') the proposed rule change as described in Items I, II, and III 
below, which Items have been prepared by PCX. On August 21, 2003, PCX 
filed Amendment No. 1 to the proposed rule change.\3\ The Commission is 
publishing this notice, as amended, to solicit comments on the proposed 
rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Letter from Steven B. Matlin, Senior Counsel, Regulatory 
Policy, PCX, to Leah Mesfin, Attorney, Division of Market 
Regulation, Commission, dated August 21, 2003 (``Amendment No. 1''). 
In Amendment No. 1, the Exchange completely replaced the rule 
language submitted with the original filing.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to amend its rule regarding its own audit 
committee composition. This change is aimed at helping improve the 
Exchange's corporate governance. Proposed new language is in italics.
RULES OF THE BOARD OF GOVERNORS
Rule 11
Committees of the Exchange
    11.8(a)-(b)--No change.

Audit Committee

    11.8(c). The Audit Committee shall be comprised of at least three 
Governors. The Committee shall be made up entirely of Public Governors, 
and at least one member of the Committee shall have accounting or 
related financial management expertise, as the Board of Governors 
interprets such qualification in its business judgment. The Committee 
shall have the responsibility to conduct an annual review with the 
independent auditors, to determine the scope of their examination and 
the cost thereof. The

[[Page 56031]]

Committee shall periodically review with the independent auditors and 
the internal auditor, the Exchange's internal controls and the adequacy 
of the internal audit program. The Committee shall review the annual 
reports submitted both internally and externally, and take such action 
with respect thereto as it may deem appropriate. The Committee shall 
also recommend annually to the Board, independent public accountants as 
auditors of the Exchange and its subsidiaries.
    11.8(d)-11.8(g)--No change.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, PCX included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. PCX has prepared summaries, set forth in Sections A, B 
and C below, of the most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange represents that, in light of the recent changes 
mandated by the Sarbanes-Oxley Act of 2002 and at the request of 
Commission's Chairman William H. Donaldson,\4\ the Exchange recently 
reviewed its own corporate governance structure. In doing so, the 
Exchange's Board of Governors felt that the Exchange's audit committee 
should follow many of the same requirements that it will asks its 
listed companies to adhere to.
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    \4\ See Letter from William H. Donaldson, Chairman, Commission, 
to Philip D. DeFeo, Chairman, PCX, dated March 26, 2003.
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    Therefore, the Exchange is proposing to amend its Rule 11.8(c). The 
proposed rule will require that the PCX audit committee be comprised of 
at least three Governors. The committee shall be made up entirely of 
public Governors, and at least one member of the committee shall have 
accounting or related financial management expertise. The committee 
shall have the responsibility to conduct an annual review with the 
independent auditors, to determine the scope of their examination and 
the cost thereof. The committee shall periodically review with the 
independent auditors and the internal auditor, the Exchange's internal 
controls and the adequacy of the internal audit program. The committee 
shall review the annual reports submitted both internally and 
externally and take such action with respect thereto as it may deem 
appropriate. The committee shall also recommend annually to the Board 
independent public accountants as auditors of the Exchange and its 
subsidiaries.
2. Statutory Basis
    The Exchange believes that the proposal furthers the objectives of 
Section 6(b)(5) \5\ of the Act in that it is designed to promote just 
and equitable principles of trade and to protect investors and the 
public interest.
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    \5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    Written comments on the proposed rule change were neither solicited 
nor received.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal, as 
amended, is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room in Washington, DC. Copies of such 
filing will also be available for inspection and copying at the 
principal office of the PCX. All submissions should refer to File No. 
SR-PCX-2003-36 and should be submitted by October 20, 2003.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\6\
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    \6\ 17 CFR 200.30-3(a)(12).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 03-24503 Filed 9-26-03; 8:45 am]
BILLING CODE 8010-01-P